As a former executive of a leading direct marketing financial services company and now chairman of Coopers & Lybrand's National Banking Industry Group, I am often asked by clients, "What does it really take to be a consistent, top performing retail bank?" By top performing they mean the very best.

The most successful companies go all out and attack their markets in a style that not only creates a "winners" culture in their organization, but also places competition in a constant defensive, catch-up mode. How? Their most advantageous weapon is their ability to choose their customers. Unfortunately, most banks have positioned themselves so the majority of customers choose them, not the other way around. By selecting customers, winners can reasonably predict performance and concentrate acquisition and delivery resources at the best potential customers for each product.

Even though most banks are aware of this advantage, only a few have developed the core competency of predictive marketing. Why? First, there is a shortage of talent in the marketplace. There are many statisticians and market researchers, but few people with the wisdom to put it all together. Witness many data warehouse and database marketing fiascoes quietly taking place.

Secondly, management has not taken the personal time to understand, in detail, how to create and monitor a predatory/predictive marketing type of company. Many still hold a 1960s vision of marketing that is more promotional and advertising in nature rather than target marketing.

Most banks have weak to non-existent customer retention efforts. Typically, voluntary account losses are blamed on superior competitive products. The majority of losses are from lack of customer knowledge and organizational deficiencies.

By lack of customer knowledge, I mean not only an organization's lack of good customer information, especially behavioral information at the point of sale and relationship management contact, but also the customer's lack of understanding as to what your organization can provide them. Evidence how many customers defect for products or services your institution already offers.

Banks also lose customers because organizational deficiencies are not people deficiencies, but rather historic structures and information systems that make it difficult to create even the illusion of customer intimacy (e.g., the seamless way Fidelity Investments handles its customers).

The banking industry is very cost inefficient and the magnitude of change required is significant. And it has not proven, as a whole, an ability to take the hard action required to reframe its cost position.

Most management teams have not made the focused effort to rethink their businesses and supporting processes. They target costs, sometimes unrealistically, to a so-called best practice level but give little thought to new ways to conduct business.

Top firms have found creative ways to melt off layers of costs, multiples above what many thought possible. They accomplish this by focusing objectively on what they do and how they work, testing alternatives until a better way is found, then moving swiftly toward that new discipline. Change and advice is rewarded from whatever source; they are constantly learning and improving.

One of the great untapped veins of opportunity in banking is in mining existing customers and heretofore unattractive customers as additional sources of revenue. Sure, everyone talks about it, but how many banks have really taken share back from consumer finance companies, check cashing companies and mortgage companies? Most banks still follow the old paradigm but have added mutual funds to their product set.

The leading companies have not only segmented their existing customer base but their non-customer base to ferret out those sizable enough opportunities to create new businesses around.

The real key to becoming a top performing retail bank lies in the executive offices. Too often, bank executives preside over their organizations and are detached from the real business. Top firms have executive management engaged at a level of detail that would startle most bank executives. A CEO of a leading worldwide financial services firm, for example, has developed a detailed level of knowledge of the customer acquisition modeling used by his company to ensure that his management teams, strategies and credit policies are truly connected at the point of customer contact.

What separates the top performing retail banks from the rest is their predatory marketing, obsession with retaining customers, breakthrough cost management, true customer maximization, and an engaged and focused management team at a level of detail unheard of in most banks.

Christopher Formant is chairman of Coopers & Lybrand's National Banking Industry Group

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